david: this is my kitchen table, and also my filing system. over much of the past three decades i have been an investor. the highest calling of mankind i

thought was private equity and then i started interviewing. i have learned from doing my interviews how leaders make it to the top. >> i asked him how much he wanted and he said 250 and i just said ok and i did no due diligence. david: you do not feel inadequate being on the second wealthiest man, am i right? thomas is the ceo of axa, one of the top insurance companies. i talked about the risks facing global insurers related to war and climate change. explain to people who are not familiar with life or health insurance or any kind of insurance what is the main business? it is to underwrite the risk, make a profit on the premiums and then take those premiums and invest it and do well on the investment as well, is that right? thomas: and we pay claims.

we receive a premium, invested and when the claim happens we have to pay it out. and all of that should be managed in a way that protects the number of people we ensure and also make a profit. david: on the premium you charge, the underwriting risk is complicated. you have to assess what the risk is that somebody will live, die, get an illness or property damage. you try to make money on the underwriting or break even? thomas: you have to make money because there is capital behind the business and then what we are basically looking at is we have a lot of historic data that we could use to price a building and then to make sure that over the duration of a contract we make sufficient money to renumerate are shareholders. david: what type of returns do you want to get on your investments, who does the investing?

thomas: we are not speculators and we look at liabilities and we invest in terms of duration in ways we would expect the liability to come. and we hold our assets to maturity. it really depends what the liability looks like. this determines the return unit and the longer the liability the higher the return. david: warren buffett famously bought a life insurance company and he takes the premiums and is a good investor. is that a model to get good investors that you give money to and give them a higher rate of return than you would normally get? thomas: we need to split our assets across many asset managers to make sure we have a high degree of diversification. we have a fourth area of business, investment management.

it has around $700 billion assets. and we obviously invest a lot through them. but, we certainly also do a lot with our asset managers to make sure that we play the market but also optimize the return. david: when we have high inflation and interest rates, what rate of return do you need to get to get comfortable? a seven, 8, 9, or 10% or higher to feel that you are doing a good job investing in money from the premiums? thomas: it depends on the liability profile. what is the duration of the viability versus investment? we need to make a higher return than we used to in a zero interest rate environment. and therefore, the insurer is a slow-moving investor. we invest around 10% of our balance sheet every year. it is not that when the market changes we immediately change

everything to change the patterns. david: if i want to go into the insurance business would you recommend life insurance, automobile, health insurance, property or casualty, what is the best? thomas: property and casualty for commercial business and health insurance. why? they are growing the most. on property and casualty for companies you have all of the new risks, supply chain risks, cyber risks and climate risks. and on the health side the question of longevity but higher health costs and how can you help people to live a better life. those are the two areas i would recommend. david: the biggest risk in property and casualty, is that climate change and things changing the way that the earth deals with the weather and things like that? thomas: absolutely, when you look at natural catastrophes the number of events have increased, not only the big events like hurricanes but secondary peril, so wildfires and flooding and drought.

this leads to the fact that you have far more events and a much higher cost of all of the natural catastrophes. david: how do you assess the risk of climate change because how do you know whether there will be a hurricane or flood, is it based on the past or projection of the future? thomas: we use data from the past but since the dynamic has changed we need to look forward. we work a lot with scientists who understand what the warming of the earth and climate change will mean for the question of taking risk, and secondly we take much less risk than we used to take. david: let us suppose there is a lot of hurricanes is that good or not? people will say they will be more hurricanes so i should buy insurance or you will have to pay more claims? thomas: it is good because it creates the awareness to do more prevention.

what we see as we said earlier, there are more events and it becomes more difficult to insure. and therefore we work a lot with prevention. if you look at the large hurricanes, hurricane katrina and irma, about 15 years apart. costs have come down over time despite inflation. so prevention does work. david: let us talk about life insurance. are you better off if people live a long time so they do not claim the life insurance or if they die sooner? thomas: it always depends. dying sooner is mostly better because if people live longer you have the longevity risk and you never know how long people live. but that depends country by country. we certainly have made the choice of being relatively cautious around life insurance. we used to be 80% life insurance in our portfolio and now we are

20%. because life insurance is very much financial risk, which is not diversifying. and secondly it is very much linked to a high degree of regulation, which makes the business very difficult. david: let us talk about health insurance. there is a lot of obesity going on in the western world and a lot of drug abuse. you take that into account when you sell health insurance? thomas: obviously, you have to give the bmi which is the proxy for how obese are you or not. but for this area we are at the beginning of a big revolution. if you look at all the new drugs like ozempic and others, they could change the pattern of obesity significantly going forward, which is exciting. david: the united states has a complicated health care program and i do not know how it works in europe. as our program the affordable care act or obamacare, is that

better or worse for health insurers and whatever you have in europe? thomas: both have the same issue which is a demographic issue. in the u.s. 10 or 15 years ago about 20% of the federal budget and fiscal budget were related to welfare. today we are at 39% due to the fact that people are getting older. you see the same pattern in europe. the question of the public type health system will come on the table and new solutions will be needed. david: may be unfairly but insurance cputation for saying i will sell you insurance but when the claim comes they will say it is not as much damage as he would claim and they take a long time to pay out. is that a fair way of how some insurance companies are and how do you deal with that image?

thomas: when i joined the industry in 2005 this image was already there and at the time it was also justified to a certain degree because we were not enough engaged to work really for the broader society. we were still very bureaucratic. if you fast-forward almost 20 years, this is not the case anymore. we are extremely engaged in society, take a topic around climate change and social inclusion and we have significantly changed the whole customer service. most of it is digital and much easier, both in the administration and the claims mentioned. david: as the ceo of a company do insurance people come to you and say we have a big risk that we will underwrite or do they leave you out of the underwriting business? thomas: 99% of all risks are done in the entities as it should be. there are some risks that come to me where i have to take a decision. ♪

david: let us talk about your background. where are you from originally and where were you born? thomas: germany. david: where did you go to school? thomas: near düsseldorf and spent all my childhood in

germany. david: you are a german speaker. did you speak french as well? thomas: i learn french in school, it was my third language. i did latin, english, and french. i did not know how valuable that it would be that i learned french. david: in the united states you hear people saying i want my little boy to grow up to be an investor, a doctor or a lawyer. you never hear people say i want my little boy to be an insurance person. did your parents tell you to be an insurance person? thomas: when i studied and after i finish my study is i was not ready to decide in which industry i went. so i went into consulting to prolong the journey and test industries. during that time i did amazing projects and somewhere in insurance and others were in women's underwear and i.t.

distribution so i saw different sectors. and i really liked the insurance sector at the time because i saw exactly what you mentioned. there is an industry that is deeply rooted in society because we are basically promoting and ensuring social cohesion and yet the industry was not recognized for it and it was the question around a very bureaucratic industry. and at the time i wanted to make a difference and i wanted to go in there. david: right before you joined you where where? thomas: boston consulting and then went to axa which was bought back. and then i ran zurich insurance and then back to axa to run germany for them. david: you have been the ceo since 2016, and the stock is up 60% since that time? thomas: a little bit more. it started at 16 euros and today it closed at 31.

david: the market capitalization was up almost an equivalent amount? thomas: $71 billion. david: france is a wonderful country with great companies usually headed by people born in france. how did a german get to be the head of a french major company? thomas: you have to ask my board of directors. no. the board ran a process and they first looked at external and then internal candidates. there were seven internal candidates and then over time the process took three years. they eliminated and we were just at the end of the day two left, one french person and me. and then the board looked at essentially three criteria, which was very much away from nationality. one was track record within the company and the other one was what is the value set of the person and the third one, what is the capacity of the person to reinvent him or herself? david: in many cases the large

french companies are run by french people, typically men, who have gone to these elite paris schools. you did not go to one of those. does that mean you are an outsider in the establishment or have you worked your way in? thomas: i have worked my way in, which needed the curiosity of the ceos in me and my ability to fully dive in. what i did for example with my rudimentary french knowledge, i only spoke french the whole day to make sure it would work and integrated myself wherever i could. this point around the university is a good one. in france you compare very good schools with the less good schools. i was neutral because i came from a university that nobody knew so i was not placeable.

david: when you are conducting business in the headquarters you speak french or english or german or what? thomas: i speak no german. whenever there is a person in the room that cannot speak french we only speak english. i still do as many of my meetings as i can in french if it is possible. david: your business is global. what is the biggest place where you have the most people, france, europe, or the united states? thomas: europe. 20% of the business is in france. 40% in europe. 20% in the u.s. and 20% in asia. david: growing a business the end acquisition or are you going to do something like that? thomas: as i said i started with 80% life insurance and now we are at 20% having cap the same revenue which meant that we had to do transactions of the company you mentioned earlier,

ipoed in the u.s. and we did transactions in the area of 30 billion euro. david: as the ceo of a company, do the insurance people come to you and say we have a big risk that we will underwrite or do they leave you out of the underwriting business? thomas: it depends on the size. normally they are doing their own business so we have a clear grid of competence for underwriting and it is about 99% of all risks done in the entities and so it should be. there are some risks that i have to take a decision. david: let us suppose i am in business school and i want to go into the business world, why would i go into insurance? thomas: we get a few young people in the business, and when you ask them why are they in the business, the number one reason they always say is the purpose of insurance. insurance companies protect

individuals, but they also help society to develop. and that is the number one driver. second, we have a lot of people who have analytical backgrounds, so people who love data and obviously the industry is data rich. with the revolution of ai coming we have the ability to also analyze unstructured data which would broaden this. and so those are the two areas why you have a lot of talent coming into the industry. coming into the industry. ♪ the all new godaddy airo helps you get your business online in minutes with the power of ai...

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economy, the united states has a situation where we have reasonably good growth in 2023, over 3%. europe has not grown quite as well. why does the united states seem to be pulling away from the european and chinese economies? is it something about the american business environment that the united states recovered from covid may be better than europe or china did? thomas: a couple of factors. number one is fiscal stimulus, the u.s. it was higher than europe and fiscal stimulus leads to more demand. secondly, there is a lot of onshoreing or reshoring from somewhere else into the u.s. which creates wealth as well. and then certainly when you look at the demography, this is much healthier than what we have in europe. david: recently we had high interest rates and inflation and you got that easily well. but now interest rates will come down and inflation seems to be coming down.

thomas: obviously these changes reduce high volatility. we spoke about the geopolitical environment. in a highly volatile and unpredictable environment it is important to take the strategy of low risk. we have built a platform that is working well. we are the biggest insurer of enterprises around the world and we want to make sure that we scale up the business. david: are you worried about russia and ukraine as a potential insurance risk? thomas: we do worry because they create claims. the russia-ukraine situation created a lot of claims on the political, marine and aviation side.

so far it is important to look out for them and certainly to see where the next crisis comes from because even if the ukraine-russia crisis was to be resolved, i am sure that there is a crisis coming, look at the red sea which has massive implications around maritime transport and cover for maritime transport and supply chain risk and so on. i project myself in the world in which we see many more of these crisis happening and we need to deal with it. david: how has technology changed the insurance business and how will ai change it? thomas: three phases, technology has changed our industry so in order to handle large data sets and to do analysis and to file customer service and expertise. that is done. we have ai coming in where i said earlier making sure that we use the unstructured data and a lot of our data is unstructured is really beneficial to understand risk more.

and then there is a third element that i mentioned the topic of prevention. this is very much happening today through digital services. example, when we look at how to analyze the risk of a property relative to climate risk. we use a lot of satellite data or, if we want to ensure marine transport and see where the danger is of theft and damage we use satellite data. we have a technological component that will increase more. david: you look like you are in good shape. you are the head of an insurance company you cannot be overweight, but you are underweight or trim, do you exercise a lot? thomas: i do five kilometers every morning and i am a passionate horse rider. in order for the horse to

support you you cannot have too many kilos. david: isn't that dangerous because your insurance company ceo and the horse could stumble and you could fall and the horse could follow you. thomas: i have fallen many times and i wear a helmet and a vast like a motorbike vest and it blows up when you fall. apart from a broken finger, nothing. david: i told your insurance people that i would be doing horse jumping they would not give you life insurance. thomas: if you do not do it professionally you want. david: what is the greatest pleasure of running a large multinational. what is the great fun of it? thomas: first of all it is great to work with so many motivated people. it is difficult to get good people but we have them and it is a pleasure to work with them. an insurer looks into any industry from satellites to crocodile farms to travel insurance. it is a very broad view. and certainly it is a place

where you can do good for society. what i mentioned earlier about our approach on climate change and investing in a different manner and underwriting in a different manner you can see the change that you can make on society. david: on a whole the message is that axa is the best insurance company you should use and is that it? and no regrets about not going into investment banking, private equity, or government you are happy with what you are doing? thomas: very happy and since i do not know what the other things are about, i will stay where i am. ♪

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